Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

Smartkarma

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Union Medical Healthcare, the largest provider of aesthetic medical services in Hong Kong, plans to raise US$150m through its IPO in Hong Kong. As per media reports, the company is in the pre-marketing stage and could launch the IPO as soon as next month.In this insight take a look at some of the factors that could impact the deal. Post deal launch we will follow up with another insight to discuss valuations. At the outset a 64% CAGR in revenue appears impressive, however, a closer look reveals a few cracks in revenue and earnings growth. In addition, were one to exclude the revenue from unutilized of pre-paid treatments, there wouldn't be much earnings left.

Union Medical Healthcare, the largest provider of aesthetic medical services in Hong Kong, plans to raise US$150m through its IPO in Hong Kong. As per media reports, the company is in the pre-marketing stage and could launch the IPO as soon as next month.In this insight take a look at some of the factors that could impact the deal. Post deal launch we will follow up with another insight to discuss valuations. At the outset a 64% CAGR in revenue appears impressive, however, a closer look reveals a few cracks in revenue and earnings growth. In addition, were one to exclude the revenue from unutilized of pre-paid treatments, there wouldn't be much earnings left. 

Union Medical Healthcare Pre-IPO Review - Dressed up with More than Its Fair Share of Botox

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Shanghai Haohai Biological Technology / Equity Capital Markets

Shanghai Haohai Biological Technology's appears to be one of the dominant player in the niche biomedical consumable market, supplying supplement material for the therapeutic application of orthopedics,&nbsp;<a href="http://www.merriam-webster.com/dictionary/hemostasis" target="_blank">hemostasis</a>&nbsp;and anti-adhesion, ophthalmology, and finally wound care and tissue filling.&nbsp;<ul><li>The company has a short history of establishment. It was formed by the combination of four acquired companies in Shanghai.&nbsp;</li><li>On one hand, the financials of the company appears to be supportive to its high valuation compared to peers.&nbsp;On the other hand, it&nbsp;was <a href="http://www.csrc.gov.cn/pub/zjhpublic/G00306202/cyb/201301/t20130109_220277.htm?keywords=" target="_blank">rejected by CSRC for its Shenzhen listing</a>&nbsp;in 2012, due to unfair dealing with minority shareholder and the material fact that its supplier of key raw material is also at the same time its&nbsp;key&nbsp;competitor.</li><li>Furthermore, the purpose of IPO seems dubious given the net cash position and strong operating cash flow. We are not comfortable with the fact that a big portion of proceeds will be used for M&amp;A without identifiable targets. For an M&amp;A player, we would prefer&nbsp;reputable private equity investors such as Shanghai Fosun Pharma (2196 HK). There are other red flags that also makes us uncomfortable, notably its dishonesty in transactions and intention to mislead investors (conscious or unconscious?).&nbsp;</li><li>Finally, we ran the IPO through our Smartkarma&nbsp;IPO evaluation framework which also indicates that it is not a convincing buy.&nbsp;</li></ul>Conclusion: We would&nbsp;avoid the deal.

Shanghai Haohai Biological Technology's appears to be one of the dominant player in the niche biomedical consumable market, supplying supplement material for the therapeutic application of orthopedics,&nbsp;hemostasis&nbsp;and anti-adhesion, ophthalmology, and finally wound care and tissue filling.&nbsp;The company has a short history of establishment. It was formed by the combination of four acquired companies in Shanghai.&nbsp;On one hand, the financials of the company appears to be supportive to its high valuation compared to peers.&nbsp;On the other hand, it&nbsp;was rejected by CSRC for its Shenzhen listing&nbsp;in 2012, due to unfair dealing with minority shareholder and the material fact that its supplier of key raw material is also at the same time its&nbsp;key&nbsp;competitor.Furthermore, the purpose of IPO seems dubious given the net cash position and strong operating cash flow. We are not comfortable with the fact that a big portion of proceeds will be used for M&amp;A without identifiable targets. For an M&amp;A player, we would prefer&nbsp;reputable private equity investors such as Shanghai Fosun Pharma (2196 HK). There are other red flags that also makes us uncomfortable, notably its dishonesty in transactions and intention to mislead investors (conscious or unconscious?).&nbsp;Finally, we ran the IPO through our Smartkarma&nbsp;IPO evaluation framework which also indicates that it is not a convincing buy.&nbsp;Conclusion: We would&nbsp;avoid the deal.

CSRC rejected it for IPO. Red flags. AVOID.

China

Shanghai Haohai Biological Technology Company Limited manufactures absorbable biomedical materials. The Company targets therapeutic areas such as orthopedics, anti-adhesion and hemostasis, ophthalmology, and wound care and tissue filling.

Shanghai Haohai Biological Technology (6826 HK)

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52-week Range	0.00 - 0.00
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Dividend (Yield)	0.00

Union Medical Healthcare Pre-IPO Review - Dressed up with More than Its Fair Share of Botox

Union Medical Healthcare, the largest provider of aesthetic medical services in Hong Kong, plans to raise US$150m through its IPO in Hong Kong. As...

Sumeet Singh

CSRC rejected it for IPO. Red flags. AVOID.

Shanghai Haohai Biological Technology's appears to be one of the dominant player in the niche biomedical consumable market, supplying supplement...

Ke Yan, CFA, FRM